Commercial Lambs Heavier at Harvest / Ethnic Market Ramping UpJULIE STEPANEK SHIFLETT, PH.D.
Juniper Economic Consulting
American sheep and lamb industry reporting often warrants two headlines in a diverse industry.
Harvested lambs got heavier into April and prices softened in the commercial market as the market slowed seasonally toward summer. Meanwhile, the non-traditional market was booming with seasonally high prices on the back of the Eastern Orthodox Easter and upcoming Muslim observance of Ramadan.
Commercial lambs at harvest have reported higher yield grades thus far in 2018, indicative of increased back fat, compared to recent years. In April, lambs trading in formula sales averaged 178 lbs. live. Weights typically get heavier in April and May, but this average was a five-year high.
In contrast, lambs sold in the non-traditional market are characterized by a lighter-weight lambs – around 100 lbs. – but are variable depending upon customer. The non-traditional market is mainly comprised of lambs sold direct to consumers. Some non-traditional lambs are processed by state inspected plants and even some federally-inspected plants and sold to ethnic retail outlets.
Ethnic Holidays Boost Lamb SalesThe Eastern Orthodox Easter holiday in April and the beginning of the Muslim observance of Ramadan in May increased lamb demand at auctions across the United States. At the New Holland Sales Stable in Pennsylvania – the largest sheep auction – prices in the last 12 months revealed pronounced seasonality: highs in April/May and lows in October/November.
The U.S. Department of Agriculture Agricultural Marketing Service reported that in one week in April at New Holland, lambs in advance of the Eastern Orthodox Easter weighing more than 80 lbs. saw a jump of $60 per cwt. in one week.
Due to the ethnic population increase in the United States, the demand for lamb has increased overall; and particularly during Muslim holidays. May 15 marked the beginning of Ramadan – a month-long period of prayer, fasting and evening feasts – by Muslims worldwide. After sunset prayers, a large feast known as “iftar” is shared with family and friends.
Depending upon the number of lambs at auction, price premiums can be realized. In April at New Holland, 75 lb. lambs averaged $243 per cwt.; 100 lb. lambs averaged $250 per cwt.; and 120 lb. lambs averaged $222 per cwt. In general, lighter-weight lambs in the ethnic trade received higher prices than heavier weight commercial lambs.
In total, 9,210 sheep were sold in April at New Holland. In the first week of May, 3,277 sheep traded. By early May, lamb demand rose at New Holland and slaughter lamb prices were higher on heavier supply.
Feeders HigherFeeder lambs in direct trade averaged $192.50 per cwt. in April, 11 percent higher monthly, but 2 percent lower than a year ago. Prices were 25 percent higher than the five-year average for April.
Feeder lambs at auction in San Angelo (Texas) averaged $208 per cwt., up 5 percent monthly and down 8 percent from a year ago. At auction in Sioux Falls (S.D.) feeders averaged $217.11 per cwt., up 2 percent monthly and down 7 percent year-on-year.
Historically, feeder lambs see annual highs in March/April and then lows during the summer months as a surge of spring-born feeders move into markets and feedlots. It is expected that feeders will still see some price advances in coming weeks.
Slaughter Lambs LowerSlaughter lamb prices weakened in April, bucking a historical trend of price strengthening toward the annual highs observed in the summer. Heavier lambs were likely pulling down averages, and not indicative of higher prices received for lighter-weight lambs.
Slaughter lamb sales on formula/grid averaged $268.51 per cwt. on a carcass basis, 5 percent lower year-on-year and 1 percent higher monthly. Average weights for slaughter lambs on formula was 178.9 lbs., up 3 percent monthly and 2 percent higher year–on-year. Formula prices are a function of a base price accompanied by a series of price premiums and discounts for factors such as weight and yield grade.
The average price on a live-weight equivalent was $134.59 per cwt. This is the lowest price level of formula lamb sales since the series was reinstated by USDA in April 2017. It is possible that as average weights got heavier at harvest, prices slumped. Before the recent interruption in the price series, prices haven’t been this low since late 2013.
In the live, negotiated lamb series, prices averaged $149.05 per cwt., up 4 percent month and down 5 percent year-on-year. Lambs averaged 168 lbs., 7 percent higher monthly in April.
Slaughter lamb prices at auction averaged $152.09 per cwt. in April, 4 percent higher monthly, 11 percent lower year-on-year and 10 percent higher than its five-year average.
Unshorn supreme pelt prices slipped by nearly 20 cents per piece on the high end ranging from $2.50 to $11.75 per piece in March to $2.50 to $11.56 per piece in April.
Packer Lamb Spreads Lower in AprilCommercial lamb packer spreads steadily contracted this year since highs enjoyed in late 2017. The live, lamb market gains accelerated, catching up to an already strong, steady meat market. The live to cutout price spread was nearly $100 per head in late 2017, but has since fallen to $69 per head.
While the spread contracted in recent months, the packer lamb spread was still 61 percent higher year-on-year. While lamb prices increased 2 percent in this period, meat prices jumped 13 percent.
Meat Prices Hold StrongWholesale lamb cutout came down sharply from a five-year high of $430 per cwt. last summer, but didn’t bottom out. It instead steadied at a new, higher level than in recent years. The net carcass cutout value averaged $328.40 per cwt. in April, up 1 percent monthly and up 6 percent year-on-year.
The eight-rib rack, medium, saw $838.68 per cwt., down one-half percent monthly and up 12 percent year-on-year. The shoulder, square-cut, averaged $274.23 per cwt., down 7 percent monthly and up 3 percent year-on-year. The loin, trimmed 4x4, saw $529.39 per cwt., up 1 percent monthly, down 1 percent year-on-year. The leg, trotter-off, saw $370.68 per cwt., up 1 percent monthly, and up 5 percent from a year ago. The further fabricated rack, roast-ready, frenched, special has held above $21 per lb. this year. It averaged $21.67 per lb. late April at wholesale.
Replacement Ewe Prices HigherOn average, replacement ewe prices gained 7 percent in the first quarter year-on-year to $192.26 per head. The rise in price suggests that producers are rebuilding flocks. It can mean there is increased demand for replacement stock and/or a relatively tight supply of stock for sale. Yearling ewes (12-24 months) brought $221.03 per head in March, young ewes (2-4 years) averaged $198.26 per head; middle aged ewes (5-6 years) averaged $162.55 per head; and ewes more than 6 years old brought $104.80 per head.
U.S. Wool Prices up 40 Percent Year-on-YearAbout 800,000 lbs. of wool traded on a clean basis in April, at price levels 40 percent higher year-on-year. In general, wool was very high quality in the western United States. Some wool was perhaps a little shorter and finer than previous years due to the dry winter. However, wool was overall clean and high yielding. High wool prices are likely a reflection of strong demand, relatively tight wool supplies worldwide, and improved American wool offering.
Reportedly, American wool growers have vastly improved wool preparation. Some wool growers have introduced Merino genetics into their flocks, while most growers are improving on-farm wool sorting (classing).
In the Territory States (western U.S.), 20 to 26 micron wools were an average 40 percent higher year-on-year on a clean basis. Twenty micron brought $6.16 per lb., up 27 percent year-on-year; 22 micron averaged $5.79 per lb., up 47 percent; 24 micron saw $4.41 per lb., up 30 percent; and 26 micron averaged $3.98 per lb., up 43 percent.
Fleece States wool – out of Oregon and Washington – was an average 41 percent higher year-on-year. Twenty-one micron averaged $6.04 per lb. clean, 22 micron was $5.70 per lb., 23 micron saw $5.21 per lb., and 24 micron averaged $4.26 per lb. In general, wools out of Oregon, Washington and some Californian wools are a little heavier, and a little shorter relative to other western wools.
AMS does not report wool prices out of the Eastern and Midwestern United States due to confidentially concerns. As the American wool industry contracts – and wool warehouses consolidate – it is challenging for AMS to protect the identity of those entities reporting wool prices. As a consequence, fewer wool prices are reported, exacerbating marketing risk for some.
In Texas and New Mexico, 19 micron averaged $6.46 per lb. clean, up 43 percent year-on-year and 20 micron saw $6.01 per lb., up 46 percent.
This spring, Australian wool prices hit their highest level in more than 10 years. On May 3, the Australian market averaged 1,836 AU cents per kg clean, up 19 percent year-on-year. In U.S. dollars, the Australian market was 1,381 U.S. cents per kg, or 626 cents per lb.
Looking forward, global wool supplies are relatively tight and demand is strong. As wool exporters gear up to trade this summer, any potential downside risk for the industry could come from the strengthening U.S. dollar. In theory, as the dollar gains, exports become less competitive on international markets. However, as recent sales in Australia have shown, market fundamentals of strong demand can outweigh any downside exchange rate effect.